The FT noted this yesterday:
Consumers should prepare for price increases this year, of as much as 20 per cent for smartphones, computers and home appliances, analysts and manufacturers have warned, as artificial intelligence demand drives up the cost of memory chips used in electronics.
They added:
Consumer electronics makers including Dell, Lenovo, Raspberry Pi and Xiaomi have warned that chip shortages were likely to add to cost pressures and force them to raise prices, with analysts forecasting increases of 5 to 20 per cent.
The paradox in this is obvious.
AI wants to be universal, and yet AI will increase the price of access to IT in general, and make it out of reach for many, just at the time when the government is making sure that access to IT is vital for integration in society.
This, then, is not some minor side issue. Assuming the prediction is correct - and it may not be, of course - the implication is that what we are facing is a new digital divide between those who have potent IT and those who have none at all.
Simultaneously, we face an inflation risk because chips are built into so many products, and the price spillover will affect vast numbers of consumer goods. This, too, will split society.
And don't doubt that this will also affect public services, where already inadequate IT will be kept in use, and the demand for austerity will grow if IT costs increase.
And all of this because a few people have decided we need AI, but no one really knows why, and almost no one has any real clue how to use it (though we have a guide here).
This is the case of financial capitalism, fuelled by financial engineering delivering technological change and physical investment for which there is no proven need, but with massive potential consequences for environmental capital, human capital and societal capital. That means this matters.
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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[…] Is this possible? Not in the opinion of the Bank of England. They predict nothing less than. 3.5% next year, but they ignore the very real risk of a recession. So, yes, I think this is plausible, and much more so than anything the Bank of England suggests, especially if, as I suspect, AI fails to deliver for stock markets and does hike inflation, as I note is possible this morning. […]
I hope this is not off topic: “Internet of Things”. Increasing numbers of products have ICs (& communications to the Internet) built into them. The aim is to turn the object (via the software & Comms) into something that generates a rent. This is a slow but relentless process but is closely related to your final sentence which could be summarised with the phrase “techno-feudalism”, which I predicted back in 2018. Indeed, “we ain’t seen nothing yet” is the most likely current situation – unless citizens decide to do something.
Much to agree with
As a micro e-commerce business we have already seen price increases in software and plugins across the board as everyone adds AI features to their products. That increase probably genuinely reflects the development work and costs that have gone into that addition.
But I don’t use any of the AI features, and I’m sure most others don’t. I can’t see why the developers have bothered, unless it’s some kind of fashion they feel they have to keep up with.
For example, I have an excellent suite of shipping plugins that helps manage our rather idiosyncratic requirements. The software now constantly prompts me to save time using their new AI features. But it would take me longer to make AI understand what I need than to set it up myself, and then I would have to check all scenarios to make sure it had got it right. If my shipping arrangements were uniform enough to be set up by AI, I wouldn’t need most of the plugins in the first place.
Thanks
And true.
I use AI, but I have never yet used anything it has created as it created it
There’s good reason to be super sceptical about AI and be worried about its impact on the economy and everything.
Not sure if you saw this? A wide ranging interview by Paul Krugman with an analyst and researcher of AI which covers all the bases: what it is, how it has already hit peak learning and what it learns here on in is likely to be dross; how it is dominating demand for resources; that no one really knows what it is for; how ultimately it is likely the source of the next financial crisis the US is going to be gifting to the world.
https://paulkrugman.substack.com/p/talking-with-paul-kedrosky
I did not watch – I find his interviews slow
Thanks for summarising
Maybe this is creating the expectation of price rises so that they can just increase prices anyway and blame external forces, not profiteering?
The energy required for all the proposed AI data hubs does not exist, and it isn’t going to. Doubling or trebling US electricity supply is not possible. There would have to be a complete breakthrough in fusion reactors, or something else. As things stand gas and oil are now in slow decline, and the energy cost of energy is rising.
Agreed
I noted this price warning through a camera website I frequent – so much for the ‘democracy’ of markets eh? Markets simply always act on the size of your wad. Tough!
As for AI I do not use it at home, I do not trust it at all, I might use it at work to edit my main communications but I somehow see it as a challenge to make my communication as clear as possible without AI.
What I abhor is how colleagues all jump on the band wagon to use AI so unquestioningly. How long before it learns so much from us and someone works out (which I am sure they are doing) that they don’t need us!
If professionals give up professing they are no longer professionals.
I wonder if the gatekeeper for your site uses AI. My comment on a previous post was declined because it appeared that I already submitted it. I had started by thanking you for the post. When I deleted the words “thank you, Richard”, my comment was accepted. So, I now know not to start with these words, but it seemed that the gatekeeper software looked only at the first few words in coming to a decision. I had to conclude that it may be “A” but it’s not very “I”.
Weird…
Each and every technology transformation of our lives has damaged the web of life. With the climate changing and ecosystems failing , we cannot risk another high tech, energy intense “upgrade”. The maximum “intelligence “ produced is trivial compared to the intelligence evident in a handful of soil, or a drop of blood. Destroying our genius life support systems for AI is hubris. Spending money for AI , instead of restoring nature is stupidity.
I cannot agree that “Each and every technology transformation of our lives has damaged the web of life.”
I don’t want to live in a cave, cook on a fire and live a short, brutal life, maybe in pain.
So I cannot agree. What we need to find is the golden mean – what technology works for us, and how. That is what AI could do for us, without ever taking over.
Richard, essentially agree with your blog. However, I sense the comment “… when the government is making sure that access to IT is vital for integration in society.…” is more reflective of the government’s failure to actually address integration into society and to invest in the right things. It, as you suggest, simply illustrates that it is “…financial capitalism, fuelled by financial engineering delivering technological change and physical investment for which there is no proven need.” As a counter-point (although not directly-related to the UK), I read the following in the Guardian today. https://www.theguardian.com/global-development/2026/jan/02/pakistan-women-girls-education-health-politics?CMP=Share_iOSApp_Other. The headline – by a Pakistani woman from a poor background – is ‘I wasn’t allowed to study, but I will make sure no girl in this village hears those same words.’ Basically, get communities to work together if you want to integrate societies.
None of the foregoing argues against the need to level-up society by ensuring that access to relevant and necessary IT technology is provided and those from poorer backgrounds can get access to IT to assist with their education and opportunities in life.
I suspect AI will just be the latest way for nepo babies to succeed in the education system / the already wealthy to maintain / increase their wealth with minimal effort or knowledge and virtually no form of value add to society.
Incidentally, I’m no Luddite and am technology-savvy, however, I am not sure that AI is a) all that it is cracked-up to be, and b) the need for it in the vast majority of cases is questionable – unless a number of Tech-bros making even sillier sums of money is seen to be good – certainly if you consider it in the widest sense including the negative impact on climate change, employment prospects, democracy, privacy, etc.
Noted, and thanks
For those who don‘t know it I recommend that they get hold of Matteo Pasquinelli’s book, ´The Eye of the Master: A social history of artificial intelligence‘. A thrilling account of how the claims for AI came to be, how they‘re based on neurological analysis waged in intellectual wars between scientists making opposing claims for AI‘s ability to mimic the brain‘s functions. The arguments have been embedded in the discourse unfortunately. Alongside this highly detailed and tightly referenced analysis Pasquinelli charts the demise of worker power through first mechanisation and then computerisation. This comment is just to offer a response to the question the writer poses: What is AI for?
Thanks.
But as you hint, I am not sure the book provides the answer.
I’ve recently written 2 substacks concerning or relating to AI’s impacts on energy costs to Earth and to consumers.
Here is a quote from https://substack.com/home/post/p-180189913:
MIT researchers estimate that by 2026, the electricity consumption of data centers is expected to approach 1,050 terawatt-hours. That’s slightly more than the energy consumption of Japan, or Russia. By 2030, it’s estimated that at least a tenth of electricity demand will be for new data centers. MIT’s Noman Bashir concludes, “The demand for new data centers cannot be met in a sustainable way. The pace at which companies are building new data centers means the bulk of the electricity to power them must come from fossil fuel-based power plants.” (Side note: check your utility stocks. Are they going up or down as a result of the demand for electricity? )
According to the International Intelligence Agency , traditional data centers use between 10 and 25 megawatts (MW) of power; demand by hyperscale AI centers can exceed 100 MW – equivalent to the annual electricity consumption of 100,000 households. The largest data center announced to date is set to consume as much electricity as 5 million households. In the United States, data centers are on course to account for almost half of the growth in electricity demand to 2030; in Japan, more than half; and in Malaysia, as much as one-fifth.
Power and water- a great deal of water -is needed to cool the hardware used for training, deploying, and maintaining generative AI models, which can strain municipal water supplies and disrupt local ecosystems. Chilled water is used to cool a data center by absorbing heat from computing equipment. It has been estimated that, for each kilowatt hour of energy a data center consumes, it would need two liters of water for cooling, says Bashir.
Globally, AI-related infrastructure may soon consume six times more water than Denmark, a country of 6 million, according to one estimate. That is a problem when a quarter of humanity already lacks access to clean water and sanitation.
Quote from https://substack.com/home/post/p-183187065:
Electricity prices will be a big issue in the US 2026 elections. Prices are going up due in part to AI and in part due to the Administration’s trying to halt cheaper energy sources.
I am already working on a video on this – so thank you.